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>> Considerations Before Business Sale

Everyone looks at getting the best deal out of selling their business, but in relation to selling your small business, money must not be the sole consideration. One thing that stays at the top of each business seller’s mind is to find the best possible buyer for their business. There is a possibility that a particular buyer may have the best deal to offer but that does not ensure that they will get the business. The market today, is full of buyers and the sellers are choosing the buyer for their business based on more than the money they can offer.

It is not an easy choice when you are faced with the choice of selecting a buyer that has the best deal to offer but does not really know much about the company’s culture, or may not fit in and one that is offering an average deal but is ideal for the kind of company you have. Choosing the latter may also mean years of financing which is another difficult choice.

It’s very normal for the structure of a deal to feature various options which have to be carefully deemed and considered, long before you can truly sit down and negotiate. Negotiations start right from day one. This is why it is very important that the seller be extremely clear about that he/she wants out of the deal, has clear priorities, and sets clear expectations for the buyer else he/she will face confusion and that can lead to undesirable consequences. You can’t ask anyone what the right choices will be as there are no wrong choices or priorities, as a seller, you have to sit down and decide what is important for you.

For example: Every buyer prefers that his seller sticks around for some time post the sale so that any hiccups can be taken care of and when they ask you that, you may just say that you’ll be there as long as they need you thinking that it may be a couple of weeks or months and then find out that the buyer has an elaborate year-long plan for the transition and you will need to be involved.

This and quite a few other aspects could end up damaging the deal because the perspectives were different or expectations were not set right, or simply because the right questions were not asked. It would have been a good idea in this situation to either ask the buyer how long they plan to need your support or to tell them exactly how long you are thinking of being around so that neither side faces a roadblock later.

A seller needs to make many such decisions and some of them are:

  • Transition

How long does the buyer need you around for? Do you have that kind of time?

  • Financing

Do you want a better offer using some retailer financing or a lesser one present with income at close up?

  • Real estate property

Is the buyer planning to rent your building as well? Do you want to rent your space? If not, then what do you plan to do with it?

  • Ownership

Do you want to keep a small stake in the business for you and your family?

  • Trust

Does one trust the purchaser? Sometimes deals are made for a lesser offer just because the sellers trust a particular buyer more.

  • Employees

It is important to check what will happen to the employees; will they be relocated, replaced, etc.

  • Legacy

A business is made with a lot of hard work and most of the sellers want to look at their business years after they have sold it and be happy that it is succeeding.

It is not practical to think that you will get everything during the deal so it is important to have your priorities right so that you are in a better position to negotiate when the time arrives.

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